This Monday, the federal government announced with great fanfare the signing of a memorandum of understanding for the purchase from Iberdrola of 13 plants, 12 combined cycle plants and a wind farm, for an amount of 6 billion dollars, through a national investment vehicle, apparently with the participation of Fonadin, managed by Mexico Infrastructure Partners.
It is not clear how the federal government would participate in the announced transaction or to what extent it would support the financial closing of the transaction. Nor is it clear what would be the benefit for the country by acquiring these assets, beyond paying for the ideological discourse, and certainly wrong, of a new nationalization of the sector.
What is apparently clear is that the Federal Electricity Commission (CFE) would not own the assets, which in its case would be operated by the State Productive Company.
With the information available at the time, and subject to more detail, it is possible to reflect on the announced operation:
- Contrary to what the President of the Republic announces, it is not a “new nationalization”. Generation activities are open to private investment and these are carried out via companies established in the country, in accordance with Mexican law; that is, the sector is already national.
- If what is intended is to give the idea that the sector is being nationalized, it is also not clear how the nationalization would be taking place, which would in any case, again, violate the constitutional framework and the country’s commitments under trade treaties and agreements.
- The reality is that the company that is disinvesting has perhaps been the most prominent in the sector during this administration and one more of those that have suffered from the measures adopted by the government; There is nothing to celebrate when a company disinvests as a result of government harassment in a sector that is open to the participation of the private sector and whose acquired rights and investments must be fully respected under the rule of law.
- This would in no way contribute to the open consultations under the T-MEC and to the otherwise rarefied environment with our trading partners in this and other sectors.
- It would seem that we are once again in the presence of an announcement that calls into question the wisdom in the use of public resources, with all the legal consequences that this implies.
- The country is on a clear path to an electricity generation deficit by the year 2025 when demand will exceed electricity generation capacity.
- In this context, it makes absolutely no sense to have public resources to acquire already installed generation capacity.
- The priorities of this administration would seem to be out of place as the installation and start-up of new generation plants is urgent, ideally in the hands of the private sector, allocating resources and efforts from the public sector to transmission projects whose insufficiency is already causing havoc.
Subject to waiting for more information and details about the structure of the proposed operation and the origin of the resources to be allocated to the purchase of these assets, at first glance it would seem that far from winning, the country continues to lose its way by focusing on issues ideological and short-term electoral agenda.
The author is a leading lawyer in the transactional practice of Santamarina y Steta.